Download Impact of Bank credit on economic activity

Impact of Bank Credit On Economic Activity
Iman Sharif *and Hen Goleg**,
The present paper is a study on the impact of bank lending fluctuations
on economic activity in Australia, New Zealand, Belgium, France,
Germany, Italy, Argentina, Brazil, Venezuela, Japan and USA. The
period investigated is between January 1997 – December 2007 using
monthly high frequency data. The methodology employed to
investigate is based on an unrestricted VAR system and follows earlier
work by Walsh 1995 (for the US). Macro-economic shocks (such as
bank loan demand, policy shocks and inflationary shocks) likely to
transmit further disturbances to the flow of bank loan supply to the
economy have been introduced into the model. The Cholesky
decomposition has been applied to the VAR system in order to
distinguish between the impact of bank loan supply, and bank loan
demand shocks. Results show that bank credit fluctuations are
responsible for movements in GDP in the countries investigated. Our
results provide further support for already existing evidence for the US
(Walsh 1995, Friedman and Kuttner 1993).
Field of research: Banking, Monetary Economics
* Iman Sharif:Bangor Business School email [email protected]
** Hen Goleg, College Road, Bangor, LL57 2DG